Private Student Loans | Alternative Student Loans

Private Student Loans | Alternative Student Loans

The FAFSA is done, your parents are kicking in some, you've saved your money from your summer job and you've applied for as many scholarships and grants as you could find. Then the financial aid package comes back from your college and you are still quite a bit short. At this point a private student loan may be your only option. Also known as alternative student loans, they are available from many private companies.

Will you be able to get a private student loan?
Many college students haven't had time to build up a work history or any sort of credit references. Since private student loan rates depend on your creditworthiness, it's likely that even if you can qualify, you will probably be paying a high interest rate, as well as a high loan fee. One possibility is to have someone else (perhaps your parents) with a good credit rating, cosign the loan for you. With their higher credit rating, you may qualify for a lower interest rate and loan fee.

How will I pay it back?
Depending on the lender, you may have several options in paying back. Many will allow you to defer the payments until graduation. Remember though, the interest is piling up on these...a $5,000 loan you take out as a freshman could easily grow to $7,500 or even more by the time you are ready to start making payments. If you have a job lined up, or a willing parent, you can also choose to either begin payments right away, or you may be allowed to make interest only payments while still in school.

Where do I get a private student loan?
There are many companies that handle these alternative loans, including many of the same lenders that handle your Stafford or Perkins loans. Among them are SallieMae.com, eStudentLoan.com and nextstudent.com.